New year, new 0% balance transfer war

Michelle Slade, personal finance analyst from Moneyfacts.co.uk comments: “For some time the industry has been predicting the death of 0% deals, and with rising bad debts and falling revenue streams the evidence is again stacking up in favour of its demise. The last year has seen fee-free deals almost disappear, with many providers increasing balance transfer fees and many more uncapping them.

“However during the last few months moneyfacts.co.uk best buy charts have again been dominated by 12 month 0% deals, and as the new year begins, competition for the top spot hots up, with HSBC and Virgin Money increasing their longest 0% deals to 15 and 13 months respectively.

”For any credit card provider looking to woo new balance transfer business, the post Christmas spend is an ideal target. With many of us over overspending at Christmas, but dreading the January credit card bill hitting the doormat, these new and very competitive deals can save you a packet in interest charges.

“So whilst the market reacts in a manner contrary to the evidence, there must be other underlying reasons why on one hand lenders are battling with bad debts, yet on the other offering these deals which make them no money during the term.

“Are these ‘best buy’ deals a marketing ploy? Dangling a big carrot can tempt customers, knowing that many will accept what is offered, even if it is not the exact deal they applied for, fearing if they shop around too much it may damage their credit rating.

“The market for accepted customers may also be restricted, with many rate tarts running out of providers they haven’t used recently, and providers only accepting those consumers with a spotless credit record. It would certainly be interesting to see the acceptance rates on some of these top deals.

“You also need to remember that most 0% deals are only available to new card customers, and in some instances your account would need to be closed for a period of two years before the provider will consider you as a new customer.

“Most importantly, don’t bury your head in the sand, as there are some great deals to be found, but make sure you choose a deal which suits your budget. If you are looking for short term finance, then a 0% deal will offer the best savings, as long as you repay the balance in full within the deal period, or are prepared and able to find another deal at the end of the term.

“There are substantial savings to be made, so take time to shop around for a more competitive credit card to manage your Christmas spend. And don’t always be put off by the upfront balance transfer fees; often the overall savings can soon outweigh this.”